Pondering the Potential of Investing $100,000 in Dutch Bros Shares to Reach Millionaire Status?
One of the buzzing stocks in the dining sector right now is Dutch Bros (BROS shedding -3.43%). This company has crawled up the ladder to become the second-largest pure-play coffee chain in the stock market, trailing behind the heavyweight Starbucks (SBUX dropping -0.80%). It seems that Dutch Bros is capitalizing on Starbucks' missteps and subpar performance.
Dutch Bros recently scored a victory in the third quarter, leading its stock to surge 28% on November 7. The company reported a 2.7% increase in comparable-store sales (comps), boosting its revenue by 28% to $338.2 million, significantly surpassing projections of $325.1 million.
The company continued its expansion spree and appears to have vast potential for further growth. Its drive-thru business model sets it apart from other chains, and it opened 38 new stores during the quarter, bringing its total to 950 across 18 states.
Despite an 190 basis point decline in company-level gross profit to 22.5%, owing to escalating labor and occupancy expenses, adjusted EBITDA increased by 20.3% to $63.8 million, and its adjusted earnings per share improved from $0.14 to $0.16, exceeding analyst estimates at $0.12.
The rollout of its mobile order system was also completed, covering 90% of its system and 96% of company-operated stores. This sets Dutch Bros up to tap into a lucrative market which has been a significant growth driver for Starbucks in recent years.
Dutch Bros upgraded its annual revenue and EBITDA forecasts. It now expects revenue of $1.255 billion to $1.26 billion, up from the previous range of $1.215 billion to $1.23 billion. The adjusted EBITDA guidance was also lifted from $200 million to $210 million, to a range of $215 million to $220 million.
Dutch Bros' growth trajectory
Transforming $100,000 into $1 million requires sustained growth for several years, perhaps even decades, so it's worth investigating Dutch Bros' potential.
The key factor in this regard is how many stores it can establish. The good news is that the market for coffee chains has a high ceiling. The company has previously hinted at a potential for 4,000 locations, aiming to reach this number over the next 10 to 15 years.
Based on this goal, the company anticipates growing its current store count by more than four times. The target could potentially rise if the company executes successfully. Dutch Bros might also expand internationally.
Compared to Starbucks' over 16,000 U.S. locations and nearly 10,000 Dunkin locations, Dutch Bros would still trail behind, even with 4,000 stores.
Can Dutch Bros make $1 million out of $100,000?
Achieving a 10x increase in the stock is no easy feat and will take time. At a market cap of $7.5 billion, a 10x increase would imply a valuation of $75 billion.
This is a reasonable target for a swift-growing restaurant stock like Dutch Bros, especially over the next decade or two. At this valuation, the company should eye revenues of $3 billion, which is currently more than double its current revenue. To achieve this, it will need to significantly increase its average unit volumes or lift its growth ceiling beyond 4,000 stores.
At this level, the company would require average unit volumes of $5 million, resulting in $20 billion in revenue, assuming most stores are operated by the company, and generating $3 billion in net income with a 15% margin.
While not impossible, this will necessitate more ambitious strategies involving opening more than 4,000 stores.
So, investors should be patient if they seek substantial returns, but Dutch Bros has the makings of a lucrative growth stock, given its immense opportunity, consistent comps growth, unique model, and robust average unit volume of $2 billion.
Dutch Bros might not turn $100,000 into $1 million, but it's well-positioned for long-term growth.
Investors interested in potential high returns might consider the possibility of Dutch Bros' growth, as the company aims to expand its store count by more than four times, targeting over 4,000 locations over the next 10 to 15 years. This growth strategy, coupled with the company's unique drive-thru business model and success in rapidly increasing its revenue, positions Dutch Bros as a potential lucrative investment opportunity in the finance sector, involving the allocation of money in the stock market.
To achieve their revenue goal of $3 billion and a net income of $3 billion with a 15% margin, Dutch Bros would need to implement more ambitious strategies, such as opening more than 4,000 stores, demonstrating the need for thoughtful and strategic investing in this promising finance venture.
